of Stakeholders, Ethics, Public Policy:

1
Management 308

• Chapter 5
• of Stakeholders, Ethics, Public Policy
• Ethics and Ethical Reasoning
• Shawn Berman
• Anderson School of Management
• University of New Mexico

2
CSR
The Meaning of Ethics

• Ethics
• A conception of right and wrong conduct
• Tells us whether our behavior is moral or
  immoral
• Deals with fundamental human relationshipshow
  we think and behave toward others and want them
  to think and behave toward us
• Ethical Principles
• Guides to moral behavior

3
Philosophical Ethics

• Philosophy tries to answer questions like
• What is the good?
• How should I behave?
• Where do notions of right and wrong come from?
• Are ethics relative?
• Business ethics involves the application of
  general ethical principles to business behavior.

4
Why should businesses act ethically?

• The book gives five key reasons businesses should
  act ethically
• To meet demands of business stakeholders
• 10 country poll shows 90 of general public
  placed
• business ethics standards above traditional
  corporate goals
• Meeting demands of stakeholders is good business
• To enhance business performance
• Research shows linkage between ethically
  responsible behavior and favorable corporate
  financial performance
• Imparts trust, promoting positive alliances among
  business partners
• 3. To comply with legal requirements
• U.S. Corporate Sentencing Guidelines provides
  that if an employee of a firm is found guilty of
  wrong-doing, the sentence may be reduced if
  preventive measures were in place in the company
• Measures judges look for in assessing this
  culpability (degree of blame) shown on next slide

5
U.S. Corporate Sentencing Guidelines

• Establish standards and procedures to reduce
  criminal conduct
• Assign high-level officer(s) responsibility for
  compliance
• Not assign discretionary authority to risky
  individuals
• Effectively communicate standards and procedures
  through training
• Take reasonable steps to ensure
  compliancemonitor and audit systems, maintain
  and publicize reporting systems
• Enforce standards and procedures through
  disciplinary mechanisms
• Following detection of offense, respond
  appropriately and prevent reoccurrence

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Why should businesses act ethically?, 2

• To comply with legal requirements (cont.)
• 2002 Sarbanes-Oley legislation was approved as
  result of corporate accounting scandals like
  Enron, and WorldCom
• Major provisions of Sarbanes-Oxley shown on next
  slide

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Sarbanes-Oxley Act of 2002

• The firms audit committee is entrusted with
  audit or oversight with all independent directors
  on the committee
• Tighter control on non-audit services, the lead
  auditor rotated every five years, and auditors
  report to the audit committee
• The CEO and CFO must sign off on financial
  statements as accurate and fair and must repay
  bonuses if a restatement of financials is
  undertaken
• A Public Company Accounting Oversight Board is
  established
• Firms are not permitted to offer loans to their
  executive officers or board of directors
• SEC guidelines for internal controls and
  financial reporting procedures require the
  adoption of, or waiver for, a code of ethics for
  the board mandate that a financial expert serve
  on the board and compel the firm to state its
  financial condition in plain English on a rapid
  or current basis

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Why should businesses act ethically?, 3

• 4. To prevent or minimize harm
• Overriding principle that business should do no
  harm
• Examples include not harming society with toxic
  waste, protecting business from unethical
  employees and unethical competitors
• To promote personal morality
• Knowing one works in a supportive ethical climate
  contributes to sense of psychological security
• People want to work for companies that do the
  right thing
• Why do ethical problems occur in business?

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Why Ethical Problems Occur in Business
Figure 5.3
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Core Elements of a Managers Ethical Character

• Managers values
• Virtue ethics
• Personal spirituality
• Managers moral development

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Kohlbergs Stages of Moral Development and
Ethical Reasoning
Figure 5.4
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Types of ethical reasoning - utility

• In consequences-based (teleological) ethical
  reasoning, the right behavior is that which
  brings about the best consequences.
• Act utilitarianism defines the good in terms of
  costs and benefits for those directly involved in
  a particular situation.
• Rule utilitarianism defines the good in terms of
  costs and benefits that would accrue to society
  as a whole if everyone acted in a particular way.
• Utilitarianism is problematic because (1)
  forecasting costs and benefits can be difficult
  and (2) it is difficult to integrate rights into
  utilitarian analyses.

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Types of ethical reasoning rights

• Principles-based (deontological) ethical
  reasoning focuses on following particular rules,
  regardless of consequences.
• Rights theories address the basic entitlements
  everyone possesses by virtue of being human.
• Justice theories address concerns about
  distributive and procedural justice (are costs
  and benefits fairly distributed?)
• But. . . it is often difficult to reconcile
  conflicting rights, and fairness is difficult
  to define.
• The book suggests you should apply all three
  types of ethical reasoning to a problem and see
  if there is agreement. What do you think?

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Whistle-blowing

• What is whistle-blowing?
• The negative consequences of whistle-blowing
• The book details many ways governments work to
  protect whistle-blowers

Why dont people blow the whistle more? When
would you blow the whistle?
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The Warhead Test Cable Dilemma, discussion
questions

• What stage of moral development do you think
  Stanton Wong is at? What about Harry Jackson?
  Why do you think so?
• What do you think Stanton should do now, and
  why? Use the one or more of the methods of
  ethical reasoning presented in the chapter to
  support your view.
• Should Stanton to blow the whistle on his
  company? Why or why not?
• What steps could the company take to prevent a
  situation like this from occurring in the future?